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Posts Tagged ‘Westchester real estate market’

I was quoted three times in an article on the 2010 real estate market discussing how sellers have adjusted to falling property values.

“Look at it like the stages of grief,” says J. Philip Faranda, the broker-owner of J. Phillip Real Estate in Westchester County, N.Y. “In 2006 and 2007, it was denial; in 2008 and 2009, it was mourning; in 2010, it’s acceptance.”

Sellers slow to change

It’s not surprising that it would take some time for sellers to come to terms with the market’s rapid and drastic changes. It’s a learning process — a “price-discovery process,” in economic terms.

Sellers frequently concede they’re harboring unrealistic expectations only after having tried and failed to sell their home. (See “Are you the reason your home won’t sell?“) Or they’ve watched other sellers reduce prices repeatedly to get buyers to even look at their homes, then seen those sellers relinquish additional ground when negotiating.

Pride often prevents sellers from seeing foreclosures as the new competition.

“If a guy with a half-million-dollar house still thinks it’s worth $600,000, I can show him two or three foreclosures that are listed for $400,000 and $450,000 and ask him how he thinks I’m going to hypnotize people into buying his house for $600,000,” Faranda says.

The Internet has helped change expectations. A seller traditionally blames his agent when his home isn’t selling. But today, Multiple Listing Service and syndication agreements let sellers list homes for sale on a dozen or more Web sites (take a look around your neighborhood), so “all the old excuses of ‘you’re not advertising my house’ have gone away,” Faranda says.

The reporter told me that she found me on Active Rain, which is nice to hear. I post quite a bit on that blog. The link is in the sidebar. I also got a nice hate email, from some anonymous guy who told me what a bad person I am because I helped cause the economy to fail. His presumptiveness is secondary; I acknowledge his frustration.

My main point in the interview with the reporter was that, once listed, a home becomes virtually ubiquitous, and, therefore, the main reason any home doesn’t sell is price.

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Generally, not up. There may be pockets of improvement, as all markets are local, but we aren’t on solid ground. We haven’t grown out of the recession yet, and there are questions as to whether the gigantic spending the administration is doing will sabotage or foster prosperity. Les Christie of CNN/Money rightly observes that rising rates, foreclosures and the eventual end of the tax credit will continue to suppress prices. I agree.

There are no arguments to the contrary. Money markets are still a shambles, the public is either unemployed or freaked out, and inventory is being pelted daily with cheap REOs. While New York is not as bad as Las Vegas or South Florida, we aren’t immune either- I see more short sales and distress now than 18 months ago. It has to cycle out before we’ll see sustainable, general improvement.

Buyers are in the driver’s seat.

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How good are the schools?

I can’t tell you. Brokers are forbidden from steering.

I can tell you where to go:

Use it in good health.

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The NY Times is reporting that Sacramento, one of the earliest places to decline, is now showings signs of recovery. This is hopeful news. How long before we can expect ecouraging news in White Plains, Briarcliff Manor, and Pleasantville? Well, it depends on what you view as good news. It will be the better part of a decade before we see prices approach their 2005 zenith. Sales are certainly up, but the bulk of that volume is bank -owned foreclosures, short sales, and other underpriced assets. We still need to liquidate billions in bad loans before we can say we are “healthy.” Perhaps we are out of the emergency room, but we aren’t out of intensive care. 

Westchester County buyers are still lowballing, cautious, and demanding. I think it will remian a buyer’s market until other sectors of the economy rebound. I am still listing a high number of short sales all over the Hudson Valley. They have become part of the vernacular. Moreover, New York City is in the early stages of it’s own decline. Hopefully, NYC’s problems will be far more short lived than the rest of the country.

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The chatter has has been for years that the rise of the Internet would have real estate agents suffer the same plight as that of travel agents and stock brokers and be passed over in favor of discount, do it yourself websites. If people can find a home on the Internet, the reasoning was, why would they need an agent? Certainly, non-traditional brokerage, for sale by owner websites and discount models have become prominent, but they have not supplanted brokers. In an efficient market, if the efficacy of those models were so strong, one would expect brokerage to suffer a mortal wound.

And yet real estate brokerage has not declined. One can even make a case that brokers themselves have harnessed the net enthusiastically, with blogs and  personal websites with home search functions. With apologies to Mikey and Life Cereal, they like it.  How can this be? I’ll offer my observations here.

  • You can’t click on a house and buy it. You have to see it, walk through it, smell it, and sit in it. And few do that without a licensee present.
  • Few do that without a licensee present because most buyers don’t want the seller around when they look.
  • Even when the seller is present, most of the time they are deplorable salespeople. I have an interest in a non-traditional company. Believe me, commission “savings” is more than counterbalanced by ineptitude, lack of objectivity, and absence of professional advice. Many a seller has lost tens of thousands in sales price in order to save a few thousand in fees. Penny wise, pound foolish.
  • A trip or a security can be purchased online in 5 minutes. Real estate takes weeks and sometimes months.
  • Travel and securities don’t require an appraisal, title search, certificates of occupancy or engineer inspections.
  • Travel and securities are cash transactions that can be done with a click; real estate is seldom a cash transaction and even when it is, it requires far more due diligence. See prior bullet point.
  • At the risk of sounding Darwinist, overall real estate professionals are a tough and resourceful sort. This is a hard business. Brokers and agents the world over embraced the new technology and made it an advantage. They adapted, survived, and many thrive, even in this down market.  
  • In the same vein, good agents sell more property than mediocre agents. Good agents won’t take a pay cut to work for a discounter. Better agents work where they’ll earn more.
  • Brokerage is more than bird-dogging for a house. Who saw the house first is immaterial, and handling the shifting landscape of the transaction requires representation. People know that a few percentage points is a bargain for what they get in return, anecdotal horror stories aside.

    Interestingly, some of the non-traditional enterprises such as Foxton’s and Iggy’s House that endeavored to harness the net and gain market share via discounting failed spectacularly. The market is efficient; these concerns should have thrived if the models were viable. They weren’t. If the Internet were going to kill our business, it would have years ago. Until people can buy real estate for $500 immediately without seeing it, consumers will need our services. And that is a good thing.

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